New Issue - Appraisal Came in Way Too High - Temecula, CA

[Hamlet]

Sister Hamlet,

Post number 10 failed to use the quote function correctly. So when you quoted it, the result was making it appear as if you were quoting something I posted 100% of when it was not.

Could you correct that? Thanks!

Darth Wader

Corrected DW!

 

[Hamlet]

AK,

What I don’t understand is if 1 in every 85 homes are filing foreclosure there and the average foreclosure sales price is $254000, why is it that there is such a bidding war going on in the high 300s?

http://www.realtytrac.com/trendcenter/default.aspx?address=temecula,+CA

I think that if you plan to proceed with this line of attack, it would be better if you hired your own appraiser to appraise the home you are planning to make an offer on and go with your negotiations from there. The appraisal that is used for the lender to make the loan must be ordered by a third party and not someone with an interest in the loan. However, you may hire your own appraiser at the beginning of the negotiations, just be aware that they lender will need to order another appraisal at the time of the loan. Your RE agent should have advised you of this, if you have one. If they lead you to believe that you could negotiate down from the appraisal ordered for the lender they did you a disservice and are not advising you with your fiduciary interests at heart. That is THEIR job. I would get another RE agent if I were you. One that knows the foreclosure/REO market in your neighborhood and I’m sure they can get you a really good deal and keep you out of a lawsuit.

Good luck.

 

[akgolfer]

I believe you misunderstood. For a mortgage loan FIRREA requires that a lender select the appraiser with no involvement of the borrower. But for a sales contract contingency satisfaction, the seller and you could have used anyone the two of you agreed upon. There is no law saying the seller and you could not have hired someone else. And, I am sure some very foolish appraiser would have happily served two masters in the process, then probably got themselves sued due to placing themselves in a no-win situation between sellers and buyers with opposing interests. As it is almost a given somebody is going to be very unhappy over the results and try to prove negligence on the part of the appraiser.

But I'm finding we are not a very bright bunch of carrots in the garden as garden vegies go.....

Yeah, we definitely set this purchase agreement up to put a lot of pressure on an Appraiser, which isn't really fair, but neither is the realestate market here in the area.

Using a Lenders appraiser is the only way it would work, but you see where that got me. I'm hoping She (the appraiser) modifies her appraisal a little ($10,000-$20,000) and that the new appraisel comes in at or lower than that so than the Seller won't complain.

Thanks again for the info.

 

[Hamlet]

Yeah, we definitely set this purchase agreement up to put a lot of pressure on an Appraiser, which isn't really fair, but neither is the realestate market here in the area.

The appraisers opinion must be unbiased despite whatever pressure you put on that appraiser, or they cannot accept the assigment. We appraisers sign a certification saying that we are unbiased in our opinion.

Using a Lenders appraiser is the only way it would work, but you see where that got me. I'm hoping She (the appraiser) modifies her appraisal a little ($10,000-$20,000) and that the new appraisel comes in at or lower than that so than the Seller won't complain.

See my post above and also note where Webbed explained that the lenders appraisal must be ordered by a disinterested party to the transaction. Also, the appraiser cannot discuss the appraisal with ANYONE other than their client, or whom the client gives permission in writing.

Unless it was to correct a mistake that I had made, I would not alter my report. I most assuredly would NOT change my value opinion to make a deal work.

Thanks again for the info.

Again, I wish you good luck.

 

[Walter Kirk]

Hello Walter,

Do I have a choice on picking appraisers or is it totally up to my Lender? If I do have pull in this area I would definitely pay extra and get a detailed appraisal done but I thought it was out of my hands.

Thanks again and let me know my options.

Unfortunately your lender chooses the appraiser for the financing however there is nothing to stop you from hiring your own appraiser first to help you understand the value of the property that you are considering buying.

You can supply the appraisal that you obtained (be sure to tell the appraiser before he starts that this is your intent) to the lender and ask the lender to accept it. If the lender does not accept the appraisal you may consider using another lender. Please remember that the appraisal costs very little in relation to the total cost of the real estate transaction and it may save you many thousands.

 

[Webbed Feet]

Unfortunately your lender chooses the appraiser for the financing however there is nothing to stop you from hiring your own appraiser first to help you understand the value of the property that you are considering buying.

You can supply the appraisal that you obtained (be sure to tell the appraiser before he starts that this is your intent) to the lender and ask the lender to accept it. If the lender does not accept the appraisal you may consider using another lender. Please remember that the appraisal costs very little in relation to the total cost of the real estate transaction and it may save you many thousands.

Ask away, no federally insured / regulated institution will agree to that as it's on the order of $20,000 per instance for doing so for them. But I agree that the cost of an appraisal is nothing compared to the prices of real estate today. It's funny, people are purchasing a hundreds of thousands of dolllars asset, and they wet their pants over paying a couple of hundred more for a top notch home inspection or $400 for a personal appraisal to use besides the one they have to pay for the lender wants.

Regarding my two masters comment, it is not impossible at all. All that is needed is for the seller to get their own appraiser, and the buyer to get their own appraiser. Now each party has an appraiser only serviing one master. OR.... Both seller and buyer agree to hold one appraiser harmless and indemnify the appraiser from each other. So it can be done. I would prefer to see each party obtain their own appraiser and appraisal. Plus, I think it would be best if both appraisers provided value ranges and not point values. Then the parties have two low end of value numbers, and two high end of value numbers, and can then negociate between themselves based on the information. But the idea is the appraisers are assisting with information, not making any recommendation to take specific actions.

 

[akgolfer]

Standard Adjustments Ranges on Appraisals?

Haven't gotten the second appraisal back yet (should be tomorrow) but I did get the initial rebuttal back from the first appraiser and it leaves a couple questions I would like to ask you appraisers (hopefully get some CA folks to comment as well)

I was wanting to know what is a typical adjustment for the following items (again, Temecula, CA this is a 3,600sf two story house built in 2006 with the surrounding area being houses built in year 2002+ and very in size from 2,400sf-4000sf).

1) what range would you add/subtract when using a comparison house that is in an HOA that has a Community Clubhouse, Pool, Tennis courts, parks, ect? (Our house doesn't have any community ammenties). Just so you know, the appraiser rebutted this by saying she only adjusts if the communities are gated......sounds like BS to me

2) what range would you add/subtract when using a comparison house that is fully landscaped (established) with nice stamped conc patio w/cover, outdoor bar island, fire pits, and the rest no dirt just established lawn/plants compared to our house that was a bank owned an the only concrete pad is a 2'x2' at the back door and then a poor, unlevel dirt yard (no vegatation but it was supposed seeded but nothing is showing)?

3) what range would you add/subtract when using a comparison house that had a 180+ degree view looking down on the valley (see all the houses in the valley and mountain) compared to our house that only has a 20 degree view that can only see the tops of the mountains looking between the neighboring houses?

Any ranges or if you agree with the appraiser that non of the above matter?

Thanks,
AKGOLFER

 

[TEL2002]

There are no 'generic' adjustments...at least there is not supposed to be. All adjustments are driven by the market. IAW, if a landscaped yard adds $10,000 to the value in one neighborhood, similar landscaping in your neighborhood might only add $5000. It is the appraiser's job to determine the market impact of these items. It is not uncommon for adjustments to vary from one neighborhood to another.

Do I think think those things you listed have an impact on value...absolutely. But without an indepth analysis of your neighborhood and the comparable neighborhoods, there is no telling what the adjustments shouyd be.

Only making adjustments if it is a gated neighborhood is a crock of bs. I can't believe you could find a reputable, honest, ethical, and good appraiser any place in this country that would agree with that appraiser's statement. If this is the approach of the original appraiser, they should be turned into the state.

 

[akgolfer]

First Thanks Tel2002 & Webbed Feet(Private message) for your quick response!

Based on your comments I believe I need to list below the appeal questions and responses and ask what should be my responses back (if any)

So here are the appeal points and exact quote responses:

1) Why were all other properties eliminated exept #1, #2, #3 (i.e. in that they have nothing in common with subject property other than size and general area) - Response: "the purpsose of an appraisal is to use verifiable data combined with experience and expertise to arrive at an opinion of data. The appraiser used, what she determined was the most appropriate comparables. She did not eliminate all other data, she just weighted comps 1, 2, and 3 most heavily, which is appropriate appraisal practice"

2) The three comparables (1,2,3) are not in the same sector and warrant an adjustment - Response: "It is common and accepted appraisal practice to use comparables from similar and competing neighborhoods, and unless they are gated communities the appraiser does not feel an adjustment is warranted"

3) Comps have fully mature landscaped yards and warrant an adjustment - Response "The subject has been seeded and re-seeded, and has a 6-zone sprinkler system. Plus there is no market data to indicate an adjustment is warranted"

4) Comps 1 and 2 have great view, which warrant an adjustment - Response "The appraiser lives in very close proximity to the subject and comps, she does not know of an extraordinary view for comps 1 and 2. We also used satellite photos, aerial photos, and street level photos and could not determine that comps 1 and 2 had superior views to the subject or other comparables"

5) Comp 3, you assume, has more desirable upgrades - Response "This would be an opinion, and we cannot argue opinions with the appraiser, as they are licensed by the state to give their opinion"

6) Why was the condition of Comp 2 given a $10,000 credit for condition? - Response "Again this is an opinion, as stated before we cannot argue opinions with the appraiser"

7)5 other comparables have been included to help justify that appropriate adjustments were not made. - Response: "Adjustments are based on market data and appraiser experience. Your adjustment amounts are your opinion, and we cannot argue opinions...As to the 5 alternative sales presented, the appraiser has indicated that they all come from the same area as the comparables in the report. #4 sold for considerably less than all other sales. It is considered a statistical outlies, just as if it was on the extreme high end, it would not be used. #5 is not more recent than comps 1,2, or 3 and once adjusted would further support the opinion of value. #6 is shouwn to be in average condition. #6 is also bank owned wihich means it sold at a liquidation value not market value. Once property adjusted, this would further support the opinion of value. #7 is a bank owned property and sold for liquidation value. Once properly adjusted this would further support the opinion of value....Based on the data provided, there is no reconsideration of value warranted."


So that was the responses. Any comments are welcome.

Thanks,
AKGOLFER

 

[Ian Valenzuela]

I guess I thought that with all the problems before that if anything the appraisal would come in lower than expect, but if it did come in high we had no problem paying the price as long as it look somewhat fair and not more than $10,000-$15,000 high.

Needless to say I didn't know they let rookies do this in this day and age and based on my discussions today I 99% sure the Lender is going to have another appraisal requested (Lender is First California Funding). As for what AMC was used, I will have to look at my credit card and report back.

I'm a professional, so I just assumed that I would get a professional job.

I'm not so sure you did a professional job in this case, however. Is it not a violation of NAR's Standards of Practice to submit an offer you knew to be significantly over market, especially one that you knew your buyer was not willing to pay? Misrepresentation of value can't apply only to the listing agent and not the buyer's agent, in my opinion.